Dear mate, This summary provides you with a general overview of the theory covered in MAC-4. It is based on the “Cost Accounting” book by C. Horngren (Pierson International Edition, 13th Ed.). It is NOT a substitution of the book, but may be used as a complementary to it. For success on the exam, we advise you to go through the book and use this summary as a guide to make it easier for you. Good luck studying!

* Financial accounting – it focuses on reporting to external parties such as investors, government agencies, banks and suppliers. It measures and records business transactions and provides financial statements that are based on generally accepted accounting principles.

* Cost accounting – it measures, analyses, and reports financial and nonfinancial information relating to the cost of acquiring or using resources in an organization.

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Week 8: CostAccounting and Management Decisions
Leah M. Pasternak
Professor Bryan Womack
CostAccounting
December 1, 2013
CostAccounting and Management Decisions
A unique and innovative manufacturing company
It all started with an incandescent light bulb and from there, rocketed into one of the most successful, world-renowned company in the world. Thomas Alva Edison first established Edison General Electric Company in 1890 (General Electric, 2013). Two years later, another electrical competitor, the Thomson-Houston Company, merged with Edison General Electric to become the General Electric Company we now know today (General Electric, 2013). Manufacturing innovators in so many various products ranging from lighting to transportation, the General Electric Company has withstood over a century of economic trends, and is by far, one of the most important manufacturing companies in the world. Some of the primary and well-known products manufactured by the General Electric Company are GE appliances and large jet aircraft engines.
Variable and fixed cost structures and what they mean to GE managers.
General Electric uses simple and competitive cost structures as one of their main strategies which has proven to be extremely effective within their company, and has enabled them to withstand years of changing...

...Management, the Controller, and CostAccountingManagement
According to Henry Fayol's Industrial and General Administration, "to manage is to forecast and to plan, organize, to command, to co-ordinate and to control". To an organization, those various activity can be narrowed to Planning, Organizing and Control by three groups of management: operating management, middle management and executive management with different role in each level.
Planning is the process of sensing external opportunities and threats, determining desirable objectives and employing resources to accomplish these objectives. Effective planning takes the company’s business (what, where, who), major policies (how), and timings (when) into account. Organizing is the establishment of the framework within which activities are to be performed. A company is usualy divided into two or more functional units/divisions suited to the company’s operation. Each units/divisions has specialized job/function, but still parts of an interdependent system that works as a whole, that’s where organizing takes place. All those objectives, all factors affecting them, and company’s activity are monitored, compared, and followed through a systematic effort or what you call “control” in management.
Although management’s planning, organizing and control seems to be a separate processes, in reality...

...﻿3.0 Variance Analysis
3.1 Flexible-Budget Variance Analysis
In Barnes Scuba Diving case, the main comparison for the flexible-budget variance analysis would be between the actual results and flexible budget. Static budget would not be useful for this comparison due to the different sales unit output which may result in a misleading and inaccurate result comparison.
With reference to the Flexible Budget Section attached in Annex X, Flexible-Budget Variance for Revenues was identified to be a favourable variance of $50,400 due to the fact that there was an increase of 216 participants on top of the budgeted 1800 participants and also an additional increased in course fee of $25 on top of the budgeted $350(selling price per unit). This favourable variance was also supported with the calculation of the selling price variance.
A closer look at the variance components reveals some major deviations from plan. Contradictory to the favourable variance for Sales Revenue, the overall contribution margin (-$9057) and operating profit (-$12,057) reflected unfavourable variances instead. These unfavourable variances were caused by the more than required variable resources being consumed with Barnes bearing responsibility for all unforeseen situations that happened and absorbing the additional costs incurred. Actual variable costs increased from $218 to $247.50, causing an unfavourable flexible-budget variable...

...or trading, require costaccounting to track their activities.[1] Costaccounting has long been used to help managers understand the costs of running a business. Modern costaccounting originated during the industrial revolution, when the complexities of running a large scale business led to the development of systems for recording and tracking costs to help business owners and managers make decisions.
In the early industrial age, most of the costs incurred by a business were what modern accountants call "variable costs" because they varied directly with the amount of production.[citation needed] Money was spent on labor, raw materials, power to run a factory, etc. in direct proportion to production. Managers could simply total the variable costs for a product and use this as a rough guide for decision-making processes.
Some costs tend to remain the same even during busy periods, unlike variable costs, which rise and fall with volume of work. Over time, these "fixed costs" have become more important to managers. Examples of fixed costs include the depreciation of plant and equipment, and the cost of departments such as maintenance, tooling, production control, purchasing, quality control, storage and handling, plant supervision and engineering.[2] In...

...COST CLASSIFICATION ASSIGNMENT
To classify the various costs would first of all require a definition between the two types of accounting that practically all businesses have to face and a number of key terms which are equally important. These are managementaccounting and financial accounting.
1. THE DIFFERENCE BETWEEN MANAGEMENT & FINANCIAL ACCOUNTING:Managementaccounting is concerned with decision making, cost apportionment, planning and control. It is based within the organisation and is solely for the use of the managers to conduct their business dealings. The process of managementaccounting is proactive meaning the company is looking ahead, not backwards.
Financial accounting on the other hand is externally based and is primarily concerned with the preparation of financial statements for organisations' stakeholders. Stakeholders would include shareholders and competitors. Unlike managementaccounting it has to comply with various financial legislations and standards. Financial accounting concerns using data from previous years which also means that the information which is used is generally out of date.
2. HOW ARE ALL THE COSTS CLASSIFIED?
To classify costs would require a number of...

...would calculate the cost of an individual product, service or activity using relevant examples. In doing this you should clearly explain any areas where judgement was required or limitations in your methodology. Finnally you should comment on whether or not you would be happy to use your calculations for decision making purposes.
Introduction
Costaccounting as an important job of costmanagement, it aims to reflect the costs of organizational operation. To maintain long term profitability, the business must sell their production at a price which exceeds their costs of productions. So mangers make better decision and achieve greater control in the material costs by analyzing their costaccounting. However, there are many intrinsic limitations and flaws in the traditional cost calculation methods.
So in this paper, we are going to calculate the cost of cooking food by using traditional costing. Next, we would like to compare the traditional costing method with absorption costing and activity-based costing, to discuss whether the traditional approach effectively reflects the correct cost, and what the limitation in these costing methods. At last, we would like to explain which costing methods should use for decision making purposes.
Traditional costing methods
Whatever the...

...Unit 2 – Contract Costing
Lecture Sheet
Contract costing is a system of job costing that is applied to relatively large cost units, which normally take a considerable length of time to complete. Building and construc¬tion work, civil engineering and shipbuilding are some examples of industries where large contract work is undertaken, and where contract costing is appropriate.
Contract Costing deals with the books of the Contractor only, i.e. the cost of the work and measuring the profit or loss on the contract. Contract costing is governed by IAS 11.
Features of long term contracts
1. By contract costing situations, we tend to mean long term and large contracts: such as civil engineering contracts for building houses, roads, bridges and so on. We could also include contracts for building ships, and for providing goods and services under a long term contractual agreement.
2. With contract costing, every contract and each development will be accounted for separately; and does, in many respects, contain the features of a job costing situation.
3. Work is frequently site based and takes a long time to complete & may spread over two or more of the contractor's accounting years.
Accounting Considerations
- Contract Account
- Contract Profit and Loss Account
- Contractee Account (e.g. Government of Jamaica)
- Balance Sheet Extract
Contract Account
A separate account will be kept for each...